Morgan Stanley: Reallocating funds to Chinese stocks, expecting improved liquidity in Hong Kong stocks in August, and suggesting buying on dips.

Morgan Stanley's report stated that the covering of short positions in financing and the inflow of funds from the south have helped the Hong Kong stock market regain momentum. It is expected that the market environment will further improve in August, leading to a better recovery. The current extremely underweight position suggests that now is the time to gradually increase holdings. Morgan Stanley pointed out that global investors are becoming more interested in Chinese stocks, so it is expected that funds will gradually reallocate to Chinese stocks in the coming months. Considering the extremely underweight position, it is recommended to gradually increase holdings now. Morgan Stanley stated that the Hong Kong stock market is poised for a significant recovery in August, mainly because e-commerce performance in the second quarter has confirmed that the impact of price wars on profitability has reached its peak; prospects for the commercialization of artificial intelligence (AI) have made further progress; and the pressure from the unlocked IPO shares in July may largely be absorbed. However, for the market to see a further significant rebound, domestic earnings expectations need to bottom out, and there needs to be improvement in the prospects for the commercialization of AI. External factors also require a clearer path from the Federal Reserve, further stabilization of interest rates and bond yields, confirmation of the capital expenditure expansion plans of major U.S. tech companies, and containment of deleveraging pressure in high leverage market sectors in the summer.